The US dollar is going through a period of mixed sentiment at the moment and we have seen the value of the dollar both increase and decrease in relation to US-China trade talks and concerns of a global economic slowdown.
The US President, Donald Trump has indicated that the ongoing trade war with China was not damaging the economy of the United States and the economy continues to be robust. On Sunday he stated “We’re doing tremendously well, our consumers are rich, I gave a tremendous tax cut, and they’re loaded up with money”.
If China are ready to agree a trade deal with the US, Trump has signalled that he may “not be ready to make a deal yet” until China’s relations with Hong Kong improve.
The biggest concern for the United States economy has been weaker manufacturing data and lower business investment. If we see both these data sets improve, then this could well strengthen the US dollar further and potentially push it below the 1.20 level against the pound.
The Federal Reserve Open Market Committee (FOMC) will publish their latest minutes from their meeting on Wednesday. The minutes will give an insight into their stance on monetary policy and indications of future interest rate decisions.
With a 25-basis point cut in the US interest rate last month, the minutes might reflect that the Federal Reserve may consider further interest rate cuts in an attempt starve off any future economic slowdown. Trump tweeted recently “"The Fed rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our economy would be even better, and the world economy would be greatly and quickly enhanced-good for everyone!"
It would not be a surprise to see the US dollar continue to strengthen as their higher interest rates attract foreign investors. The US dollar is also favoured as a safe haven currency in particular for investors who are risk-averse to the ongoing global weakness and uncertainty.
Over the coming days the US will be releasing a series of high impact economic data and the market will be paying close attention to the Jackson Hole Symposium on Thursday. Central bankers, finance ministers, academics, and financial market participants from around the world will be attending and comments and speeches from central bankers and other influential officials can create significant market volatility.
For clients who are looking to do a currency exchange involving the US dollar, you may wish to contact your account manager so they can keep you abreast of these economic developments.
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